Korea’s business loans Q3 up by biggest in 10 yrs amid poor economy

Commercial and industrial loans (C&I loans) in South Korea grew at the fastest pace in a decade during the third quarter this year as employers had to seek out loans to stay afloat amid deteriorating business conditions at home.

According to the Bank of Korea on Thursday, C&I loans extended to businesses including self-employed amounted 1,107 trillion won ($988.2 billion) as of Sep. 30, 2018, up 24.3 trillion won from three months earlier. The on-quarter gain is the fastest since the third quarter of 2008 at the height of the global financial crisis.

C&I loans refers to loans extended to a business rather than an individual customer by depository banks and non-bank depository institutions like savings banks and credit unions. They are made to provide working capital or finance large capital investment.

Industrial loans for working capital in the third quarter stretched 14.2 trillion won from the previous quarter while those for facilities investment widened 10.1 trillion won to suggested businesses borrowed money for survival rather than expansion.

By industry, lending to manufacturers amounted 347 trillion won, up 4.7 trillion won from the second quarter. The quarter-on-quarter gain is the largest since the first quarter of 2017. Loans to metal processors/machinery makers grew by 700 billion won and those to electronic components/computer/video & communication equipment makers were also up by 700 billion won.

C&I lending to the service sector stood at 659.7 trillion won after expanding by 18 trillion won from the previous quarter. The on-quarter growth is the largest since the central bank started compiling such data in the first quarter of 2008.

Nearly half of the fresh loans or 8.9 trillion won were extended to the real estate businesses as investors continued their investment in the property market amid prolonged low-interest environment. Loans to wholesale/retail and hotel/restaurant businesses grew by 5.5 trillion won compared to previous quarter as they kept struggling from higher labor cost on minimum wage hike and depressed consumer demand.

Lending to the construction sector totaled 41.4 trillion won, up 800 billion won from the second quarter.